Another test of the trans Tasman relationship

A key test of the Trans Tasman relationship will come in March next year when New Zealand must decide on replacing its six P3 Orion maritime surveillance aircraft.

The previous Government got approval from the US State Department last April to purchase four P8 Poseidon patrol aircraft for a cost of approximately $2.2 billion.

But POLITIK understands that option runs out next March.

If it is not exercised, New Zealand would then go to the bottom of the queue for the aircraft.

And that could put more stress on the relaitonship with Australia because it would limit the ability of the two air forces to work together in the Pacific.

Perhaps just as importantly the decision will be seen as a test of the new Government and its commitment to defence.

However, it appears the previous Government made no provision for the purchase in its budget.

The P3s have notched up some of the highest flying hours in the world, a lot of it at low altitude over the sea.

They have been the subject of a series of substantial upgrades but are now considered to be near the end of their operational life.

Thus the need to replace them is urgent.

The $2.2 billion bill is part of the overall $20 billion Defence procurement programme unveiled by National last year and which was confirmed by Prime Minister Jacinda Ardern last week.

But there are questions about how the huge bill should be accounted for.

The politics of booking a charge that large in Labour’s first budget are unlikely to be attractive.

Treasury apparently insists that the sum is booked when the order is placed

The money is a cap[ital charge so has no impact on the day to day fiscal budget of the Government and the actual payments are not counted against debt until they are paid.

Erven so, previous Defence Ministers have been in dispute with Treasury over the way the sum had to be accounted for.

Possibly as a consequence of that the Pre=Election Fiscal Update does not appear to show any provision within the defence capital expenditure budget for the aircraft.

Net capital expenditure for Defence out to 2021 is budgeted at a total of only $2.0 billion.

Labour has allowed an extra $6.4 billion for capital expenditure out to 2021 over National --- but almost all of thay is accounted for by resuming contributions to the NZ Super fund.

In its election manifesto, Labour said it broadly supported the capability upgrades outlined in the 2016 White Paper, but reserved the discretion to examine further to see whether the proposed purchases met capability requirements at the best value for money.

The Government will be under pressure from Australia to confirm the purchase.

The two countries co-ordinate their maritime patrols across the South Pacific as part of the so-called Quad Agreement with the United States and France.

The matter was apparently discussed at the Kirribilli House meeting between Ardern and Australian Prime Minister Malcolm Turnbull, and Australia stressed the need for the inter-operability of the two Air Forces.

To encourage a positive decision in Wellington, the Australians have made an offer of assistance with training of crew and maintenance of the aircraft.

Some resistance might be expected from Labour’s left at such a large sum being allocated to the armed forces albeit that the maritime patrols serve a largely peaceful purpose.

At the same time, NZ First have called for the purchase to go ahead but have argued it should involve more than four aircraft.

“Of immediate concern to NZ First are the numbers involved. Replacing six aircraft with just four is a cut of one-third, especially when the 737-based P-8A Poseidon has the same range and loiter time as our Orions, said NZ First Leader, Winston Peters, in April last year.

Thus the decision is shaping up as another litmus test of where the Government stands internationally.